In Praise of Process: Examining the SEC, Rule 14a-8(i)(8), and AFSCME v. AIG

Journal of Business & Technology Law, Vol. 5

WVU College of Law Research Paper No. 2019-013

22 Pages Posted: 8 Apr 2019

See all articles by Jena Martin

Jena Martin

West Virginia University - College of Law

Date Written: 2010

Abstract

Rule 14a-8(i)(8) is a provision under Securities Exchange Act Rule 14a-8, what is commonly known as the proxy access rule. Rule 14a-8(i)(8), is the “election exclusion” to the proxy access rule. As it is currently written, the rule provides that corporations may exclude from its ballot a shareholder proposal that relates in any way to director elections, even if that proposal would not immediately affect a director election. However, the rule as drafted lent itself to another possible interpretation: that while shareholder proposals that would immediately affect director elections would be excluded under 14a-8(i)(8), shareholder proposals that would institute procedures that would affect future director elections would not be excluded.

Advocates for greater shareholder access to boardrooms have examined Rule 14a-8(i)(8) (and a companion Rule 14a-11) as an opportunity for shareholders to achieve “real corporate governance” in the companies’ in which they own stock. Yet, the SEC did not adopt the proposed rule that would have allowed for greater shareholder access. Instead, the SEC chose to strengthen the exclusion and, in so doing, made clear that rules enabling a process-oriented function for director elections would not be met with favor.

While most commentators have focused on Rule 14a-11 and the general concern of shareholder access to the ballot and its effect on managerial control, this essay offers a slightly more nuanced argument – that the process-driven nature of Rule 14a-8 and potential revisions under Rule 14a-8(i)(8) offer a specific opportunity for shareholder empowerment that cannot be underestimated. By examining the specific provision of Rule 14a-8(i)(8) from this perspective, this paper sheds light on a part of the debate that has not yet been discussed - namely that the process-oriented approach embodied in Rule 14a-8(i)(8) offers a unique opportunity for shareholder empowerment that is currently lacking in the shareholder access debate.

Keywords: Exchange Act Rule 14a-8, Securities and Exchange Commission, SEC, financial crisis, shareholder, access, participation, empowerment, AFSCME v. AIG, corporate governance, oversight, accountability,

JEL Classification: K2, K22, K23

Suggested Citation

Martin, Jena, In Praise of Process: Examining the SEC, Rule 14a-8(i)(8), and AFSCME v. AIG (2010). Journal of Business & Technology Law, Vol. 5, WVU College of Law Research Paper No. 2019-013, Available at SSRN: https://ssrn.com/abstract=3365179

Jena Martin (Contact Author)

West Virginia University - College of Law ( email )

101 Law School Drive
Morgantown, WV West Virginia 26506
United States

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